Take-Two to acquire FarmVille maker Zynga for $12.7 billion

Take-Two, the game company behind Grand Theft Auto, among other things, wants to acquire smartphone game maker Zynga for $12.7 billion. The two sides have agreed on this. It is the most expensive acquisition ever in the games industry.

By acquiring Zynga, Take-Two will take a leadership role in the mobile games segment, said Take-Two CEO Strauss Zelnick. He emphasizes that this is the fastest growing segment in the interactive entertainment industry. The two companies believe that they are very complementary and that they can grow bigger together. Take-Two has a strong portfolio of games for PCs and consoles, and Zynga is big on smartphone games.

Take-Two emphasizes that revenue from Zynga’s smartphone games will lead to a greater source of revenue from recurring consumer spending. Those are the ‘recurring expenses’ of players in free-to-play games. Take-Two calls this “a very attractive revenue stream” and says it helps mitigate volatility in quarterly earnings. Until now, those financial results have relied heavily on major PC and console game releases.

Take-Two has been aiming to increase revenue from recurring expenses for years. This is especially visible with Grand Theft Auto 5. That game first came out in 2013, and since then the publisher has released numerous expansions for GTA Online in which players can do microtransactions. In the previous financial year, Take-Two’s percentage of revenue from the recurring player spend category was already 60 percent.

Zynga has been around since 2007 and is best known for FarmVille, a game that was released on Facebook in 2009. Zynga has made several acquisitions itself in recent years and has grown into a large company in the field of smartphone games. Zynga had sales of $1.97 billion in 2020 and employed 2,245 employees.

The merger of the two companies results in one of the largest game companies in the world. Take-Two estimates that the companies together generated $6.1 billion in sales in the twelve months to the end of September 2021.

The boards of directors of both Take-Two and Zynga have approved the acquisition and expect the acquisition to be fully completed by June 30, 2022. Shareholders still need to approve and approval from regulatory authorities is also required.

Under the deal, Take-Two will acquire all of Zynga’s shares. Shareholders will receive $3.5 per share in cash and $6.36 in Take-Two shares. This brings the total value to $12.7 billion. Converted that is about 11.2 billion euros.

Most expensive acquisition in the games industry

Never before has a game company been acquired for such a high amount. Another recent major acquisition is that of ZeniMax, the parent company of Bethesda. That company was acquired by Microsoft. The deal was worth $8.1 billion.

However, it is not the first time that billions have been paid for a company that makes smartphone games. In 2016, Tencent acquired Clash of Clans developer Supercell for $8.6 billion, and that same year, Activision-Blizzard completed its $5.9 billion acquisition of Candy Crush maker King.

CSR Racing 2, one of the recent Zynga smartphone games